Bulgaria

A1 Bulgaria

Logo A1

In the year under review, the Bulgarian market was character­ized by positive trends, due mainly to growth in the fixed-line business and an improved subsidy level. The positive development in the fixed-line business resulted from corporate solu­tions as well as successful up- and cross selling residential customers. In addition, the sports channels with exclusive TV content are still making a significant contribution to the positive development of the RGU and ARPL trends. The mobile business continued to improve and grew slightly year-on-year, with active customer retention measures in the mobile resi­dential segment helping to reduce churn. During May 2018, Mobiltel was successfully rebranded into A1 Bulgaria.

The mobile contract segment remained stable in 2018. The total number of mobile subscribers was, however, down year-on-year, which was attributable to the prepaid segment. Total fixed-line revenue generating units (RGUs) increased as the positive trends in TV and broadband were able to offset the decline in fixed-line voice services.

In the Bulgaria segment, total revenues rose by 3.5 % and by 4.8 % excluding one-off effects. Other operating income in 2017 was positively affected by a one-off effect of EUR 5.8 mn. Revenue growth was attributable to the increase in fixed-line service revenues and equipment revenues. Fixed-line service revenues rose, supported by strong demand for the exclusive sports content and higher speeds as well as by customized fixed-line corporate solutions. Equipment revenues grew due to lower subsidies per handset and higher-value devices. Mobile service revenues increased as growth in the business segment more than outweighed the
decline in the prepaid segment.

Costs and expenses rose, amongst other factors, due to higher cost of equipment as a result of the continuous demand for higher-value devices. Interconnection costs also rose due to higher outgoing traffic to other networks. Content costs rose in line with more TV customers and sport content production. Personnel costs also rose due to increased salaries in cus­tomer-facing areas while administration, commissions and network maintenance costs were lower.

In the Bulgarian segment, rising total revenues more than offset higher costs and expenses, which led to EBITDA growth of 6.1 % (excluding one-off effects: +8.6 %). Depreciation and amortization increased by 12.7 % due to the brand value amortization in the amount of EUR 144.0 mn (2017: EUR 99.7 mn) in connection with the group-wide rebranding. This again resulted in negative operating income in 2018 in the amount of EUR 105.1 mn (2017: EUR –85.6 mn). Excluding the D&A of the brand value amortization, operating income increased by 175.3 % year-on-year.

As there have been no M&A transactions in Bulgaria between the beginning of the comparison period and the end of the period under review, the previous analysis is based on reported figures.